Senate Probe Finds Apple Avoids Billions in Taxes

A new Senate investigation has found that Apple Inc. has used a complex web of offshore companies - particularly three in Ireland - to avoid paying billions of dollars in U.S. income taxes.

Apple executives will visit Capitol Hill on Tuesday to respond to the findings contained in a 40-page review by the Senate Permanent Subcommittee on Investigations.

The company is not accused of breaking the law, but rather using loopholes in the American tax code.

"It's like saying you haven't shifted the golden eggs offshore after you transferred the golden goose offshore," Sen. Carl Levin of Michigan, chairman of the committee, told reporters late today at the Capitol.

The Senate committee, which conducted similar investigations last fall of Microsoft and Hewlett Packard, accused Apple of shifting profits overseas by using a cost-sharing agreement to transfer intellectual property offshore.

The investigation found that Apple negotiated a tax rate of less than 2 percent with the government of Ireland - far lower than the normal rate of 12 percent. An Irish subsidiary of Apple, which was not registered as paying taxes anywhere, had sales totaling $74 billion from 2009 to 2012.

"Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America's largest tax avoiders," Sen. John McCain said today. "A company that found remarkable success by harnessing American ingenuity and the opportunities afforded by the U.S. economy should not be shifting its profits overseas to avoid the payment of U.S. tax, purposefully depriving the American people of revenue."

The findings of the investigation were set to be released at 7 p.m., but Apple sought to get ahead of the report by releasing its testimony today. In a 16-page response, Apple vigorously defended its business practices and described its company as "likely the largest corporate income tax payer" in the country - with $6 billion in 2012 alone.

"Apple does not use tax gimmicks," the company said in a statement. "Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the U.S. in order to avoid U.S. tax."